Mitsui Chemicals (TSE:4183) Has Announced A Dividend Of ¥75.00

Mitsui Chemicals, Inc. (TSE:4183) will pay a dividend of ¥75.00 on the 25th of June. The dividend yield will be 3.9% based on this payment which is still above the industry average.

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Mitsui Chemicals' Projections Indicate Future Payments May Be Unsustainable

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Prior to this announcement, the company was paying out 158% of what it was earning, however the dividend was quite comfortably covered by free cash flows at a cash payout ratio of only 41%. Given that the dividend is a cash outflow, we think that cash is more important than accounting measures of profit when assessing the dividend, so this is a mitigating factor.

Earnings per share is forecast to rise by 28.8% over the next year. If the dividend continues on its recent course, the payout ratio in 12 months could be 138%, which is a bit high and could start applying pressure to the balance sheet.

Check out our latest analysis for Mitsui Chemicals

Mitsui Chemicals Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2015, the dividend has gone from ¥30.00 total annually to ¥150.00. This works out to be a compound annual growth rate (CAGR) of approximately 17% a year over that time. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

The Dividend Has Limited Growth Potential

The company's investors will be pleased to have been receiving dividend income for some time. However, initial appearances might be deceiving. Earnings per share has been sinking by 13% over the last five years. This steep decline can indicate that the business is going through a tough time, which could constrain its ability to pay a larger dividend each year in the future. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this becomes a long term trend.

Our Thoughts On Mitsui Chemicals' Dividend

Overall, we don't think this company makes a great dividend stock, even though the dividend wasn't cut this year. The company has been bring in plenty of cash to cover the dividend, but we don't necessarily think that makes it a great dividend stock. We would be a touch cautious of relying on this stock primarily for the dividend income.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 4 warning signs for Mitsui Chemicals that investors need to be conscious of moving forward. Is Mitsui Chemicals not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.